Books, even libraries have been written about Schumpeter and his work. Joseph Alois Schumpeter is considered as the founding father of the academic fields of entrepreneurship and innovation.
Schumpeter was an Austrian economist, both in the sense that he was Austrian by birth, but also in the sense that he is considered an economist representing the ‘Austrian School of Economics’. In his writings and thoughts in innovation and entrepreneurship he did something that only the truly great thinkers can get away with: he formulated two different, even contradictory theories of innovation, knows as Schumpeter “Mark I” and Schumpeter “Mark II”.
Schumpeter “Mark I”, which he formulated in his early career is about the function of the entrepreneur. An entrepreneur is someone who makes new combinations of resources (“Neue Kombinationen”). It other words, the entrepreneur gathers a collection from the smallest dust particles in the economy, and puts them together to creating something unique. That can be something very limited, for example, a shoe polisher who find a unique street corner, to something very revolutionary, for example, putting some pieces of wood together to create a wheel. Innovation, says Schumpter “Mark I”, mainly comes from entrepreneurs creating new combinations.
Schumpeter “Mark II”, which he formulated later in his career, is about the function of the large enterprise. The large enterprise possesses the necessary resources and capabilities to develop innovations, introduce them into the market and make sure that customer adopt them. They can invest in R&D, they have marketing departments and the necessary distribution channels. Innovation, says Schumpeter “Mark II”, mainly comes from large enterprises.
Schumpeter, J. A. (1934) . The theory of economic development. Cambridge. MA: Harvard.
Schumpeter, J. A. (1942). Capitalism, socialism and democracy. New York: Harper & Brothers.